Escalating US-China trade tensions triggered a sell-off on Asian stockmarkets on Wednesday after Donald Trump pushed ahead with threats to impose tariffs on an additional $US200 billion ($270 billion) worth of Chinese products. The move also prompted a swift rebuke from Beijing, which called on the rest of the world to unite against "trade bullying".

China warned it would take "necessary countermeasures" as the Trump administration published a list of thousands of Chinese products that would be affected by 10 per cent tariffs expected to come into force in two months.

The move reinforces Mr Trump's threat to impose tariffs on up to $US500 billion worth of Chinese goods, the equivalent of the total amount the US imported from China last year, and is an extension on duties already announced on $US50 billion of goods. Investors in China and throughout the region were rattled by the news.

The Shanghai Composite Index led the declines, falling 2.3 per cent in afternoon trade as pessimism crept back into a market worried that a trade war would exacerbate existing threats to the country's economic stability. Beijing is looking to reduce local government and corporate debt and ensure the unregulated shadow banking sector does not get out of control.

A container is loaded onto a cargo ship at a port in Qingdao in east China's Shandong province.
AP

Hong Kong's Hang Seng Index dropped 2 per cent in morning trade and Japan's Nikkei fell 1.7 per cent. Australian stocks were also in negative territory. S&P 500 and Dow futures dropped around 1 per cent, pointing to a weak opening on Wall Street later on Wednesday.

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Trade war under way

Washington said it would impose 10 per cent tariffs on an extra $US200 billion of Chinese goods following a two-month public consultation period. This came days after tariffs on $US34 billion of Chinese goods came into effect on Friday, the first time the implementation of duties was applied directly. Economists said the development signalled the trade war was officially under way.

Tariffs on another $US16 billion of goods are expected to come into effect later this month.

China's Commerce Ministry said it was "shocked" by Washington's "totally unacceptable" move. "The US behaviour is hurting China and hurting the whole world. It is unreasonable. We would advocate the international community to make a joint effort to safeguard free trade rules and the multilateral trade mechanism," it said.

China and Germany signed a trade deal in Berlin a day earlier. Beijing wants the European Union – which Mr Trump has also threatened with trade tariffs – and other countries including Australia to join forces to fight against US protectionism.

Many of the thousands of items the US has targeted in the latest round of the trade war are consumer products, extending beyond goods related to Beijing's "Made in China 2025" strategy which has been at the centre of Mr Trump's campaign. They included seafood, meat, dog food, home appliances, car parts and beauty products. The latest tariffs are not expected to come into effect until the completion of a public consultation period, which takes two months.

"For over a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition. We have been very clear and detailed regarding the specific changes China should undertake," US Trade Representative Robert Lighthizer said in a statement.

"Unfortunately, China has not changed its behaviour – behaviour that puts the future of the US economy at risk. Rather than address our legitimate concerns, China has begun to retaliate against US products. There is no justification for such action."

No sign of backdown

In China, there is no sign Beijing will back down from the trade stoush despite increasing concern about its impact on the economy, at a time when stability is crucial. China's biggest stockmarket has lost 14 per cent of its value so far this year. The Shanghai Composite Index had been showing signs of recovering from weeks of losses until Wednesday's announcement sent it back into negative territory.

An editorial in the state-owned People's Daily newspaper on Wednesday urged Chinese citizens to "beware of the Cold War trap set by American protectionism". It accused Washington of politicising trade, which it said would have a negative impact on the global economy.

Economists warned that the risk of substantial economic hardship to China has risen. UBS said another $US100 billion in tariffs would shave between 0.3 and 0.5 percentage points off China's GDP growth.

The yuan was also weaker against the US dollar on Wednesday, although current strategists said market participants were unlikely to push the yuan too hard to test the Chinese central bank's tolerance around 6.7 to the US dollar

Ken Cheung, currency strategist at Mizuho, said China was unlikely to let the yuan slide too much further to be used as a weapon in the trade war but it could take more modest steps to retaliate by using export subsidies or restrictions on the service sector such as tightening travel visas to the US.